Wednesday, March 26, 2008
22. Fiscal policy has a large political bias because politicians are reluctant to increase taxes or cut spending on constituents.
22. Fiscal policy has a large political bias because politicians are reluctant to increase taxes or cut spending on constituents. If the economy needs a stimulus, fiscal policy is a popular political choice. Most people like politicians who cut taxes and increase the benefits provided to them by additional government spending. Yet it is very difficult to use fiscal policy when the economy needs dampening. People tend to dislike politicians who raise their taxes or reduce the benefits provided to them by government. In 2005, for example, the U.S. Department of Defense attempted to save U.S. taxpayers millions of dollars in annual expenditures when they announced plans to decommission the U.S.S. John F. Kennedy, an aircraft carrier based at the Mayport Naval Station near Jacksonville, Florida. Because the carrier provided benefits to the region, such as employment opportunities for workers and increased incomes for area businesses, Florida politicians, including conservatives who profess to favor smaller government, fought to prevent this reduction in government expenditures. Fiscal policy is discussed in module 10.